What was really behind the AIG bail out ?
questions.
will be very enlightening to say the least.
C
What was the precise conversationGood questions and I'll bet the answers, if we ever get them,
among Bernanke, Geithner, Paulson, and
Blankfein that preceded the initial
$80 billion grant?
Was it already known who the
counterparties were and what the
exposure was for each of the
counterparties?
What did Goldman, and all the
other counterparties, know about AIG's
financial condition at the time they
executed the swaps or other contracts?
Had they done adequate due diligence
to see whether they were buying real
protection? And why shouldn't they
bear a percentage of the risk of
failure of their own counterparty?
What is the deeper relationship
between Goldman and AIG? Didn't they
almost merge a few years ago but did
not because Goldman couldn't get its
arms around the black box that is AIG?
If that is true, why should Goldman
get bailed out? After all, they should
have known as well as anybody that a
big part of AIG's business model was
not to pay on insurance it had issued.
Why weren't the counterparties
immediately and fully disclosed?
Failure to answer these questions will
feed the populist rage that is
metastasizing very quickly. And it
will raise basic questions about the
competence of those who are supposedly
guiding this economic policy.
will be very enlightening to say the least.
C
Advertisement
I suspect the reason the government is tripping all over itself regarding AIG, and the whole economic meltdown for that matter, is because our entire economic/financial system needs drastic wholesale surgery. Doing such drastic surgery all at once would probably kill the patient (our economic/financial system), who is, while bleeding all over the floor, still alive.
I think our governmental doctors are left with only one practical option, to try and keep the patient on life support long enough for the necessary surgeries to be performed in a controlled manner. The doctor is loath to tell the patent's family (us) how dire the situation actually is. So, they are stalling and misdirecting us until they can stabilize the patient. Doctor truth telling is greatly complicated by the fact that a major component of patient survival is the confidence of the family.
Therefore, I suspect the odd behavior by congress and the administration amount to clumsy shock management not corruption. Just my opinion.
March 19, 2009 11:31 AM | Reply | Permalink
I also suspect the government fully knew about those AIG bonuses. They likely viewed them as an unpleasant, but pragmatically necessary evil. They would also have known how politically unpalatable such bonuses would be and surely hoped never to have to discuss them.
Said, using my rather gory medical analogy:
The door to the operating room swung open for a few seconds and we got an ugly glimpse of the bone saws and drills in the hands of the doctors.
March 19, 2009 11:53 AM | Reply | Permalink
Of course they should bear a portion of the risk. Goldman and the others that bought protection from AIG should share the pain.
But that's why Geithner should RESIGN! He has completely bungled this mess. We still have no idea what the long term plan is for AIG. It should have been allowed to file for bankruptcy and nationalized. Split it into good bank and bad bank to allow it's "regular-way" insurance practice to continue. But WHY have Geithner and Obama continued to sink good money after bad?
March 19, 2009 9:29 PM | Reply | Permalink
Bill, I essentially agree with you. That's twice this week. Should I be worried?
Bankruptcy would seem to be an okay solution, so long as it resulted in a controlled breaking of AIG in to smaller non-harmful sub-units. Nationalization also would seem an okay solution, as the AIG fiasco does represent a legitimate threat to national security.
I can't think of a compelling reason for why the administration would continue pouring treasury funds in to AIG. I can only guess that they must be convinced such is necessary to sustain financial system confidence going forward, or something. I certainly don't believe Obama has any overriding affection, sympathy, or loyalty to the banking industry, even supposing that Geithner did.
March 19, 2009 10:02 PM | Reply | Permalink
Congress is being a little bit clumsy. They probably accepted the retention bonuses as a fait accompli- they're lawyers. But how can they be expected to see the mess clearly?
There is collusion. There is conspiracy. It's really there. None of the people involved at the higher levels of these companies are strangers to each other. They leave (left) Lehman to work at Goldman, Citi, Chase or some other gambling parlor. These specialized skills don't go to Staples or Home Depot. The players don't come from West Chester University or Shippensburg. And they don't get there by virtue of virtue.
If the financial industry wants to open up again, these players should fork over the bucks to do it. I have no use for credit default swaps, any more than the DJIA has an effect on my life. Maybe which tortilla chips I have access to after one or another issue crashes, but what's the difference? Are people going to stop growing oranges? Mining coal? Butchering cows because housing starts are down and it depressed NASDAQ and FTSE?
Phony baloney.
March 19, 2009 10:07 PM | Reply | Permalink
I want a full investigation without pointing fingers at anyone. I really do want to know what is going down since Sept. of last year.
March 19, 2009 11:34 PM | Reply | Permalink
Well; you're not going to get it.
The only two who could do the investigation -- Frank and Dodd -- are up to their eyeballs in promoting these policies of throwing money at insolvent financial institutions and of saving Wall Street at any cost.
They're not about to do a show-and-tell.
March 20, 2009 9:42 AM | Reply | Permalink
Oh Yva. The first day of SPRING. And my son is sending me a twenty for my weekend. And the snow and ice has been receding for a week.
There is not going to be any cover up here. The groundswell is too great. Too much pressure.
But we shall see. And you have a nice day.
March 20, 2009 10:08 AM | Reply | Permalink